How Culture and Education System Strengthen South Koreas National Competency - Case Study Example

How culture (i.e. Confucianism is a national belief system) and Education system strengthen South Korea’s national competency in global market (i.e. attracting FDI, MNCs). Table of Contents Introduction 3 Culture 3 Education 4 Analysis 5 Porter’s Diamond Approach to the Competitiveness of Korea’s Clothing Industry 5 Table 1 6 Table 2 7 Development of Korea & Comparison with Other Nations 9 Development of Korea 9 Korea’s Comparison with Singapore 12 12 South Korea’s FDI Status 12 Opportunities 13 Conclusion 14 References 15 Bibliography 17 Introduction “Culture” can be defined as the imbibed practice of any social being that deals with the traditions, thoughts, beliefs and ideas and which is naturally transmitted to their succeeding generations (Bartle, n.d.). “South Korea”, officially known as Republic of Korea (ROK) or only “Korea”, is situated in the eastern part of Asia and is located at southern half part of the Korean Peninsula. South Korea has a republic presidential government consisting of sixteen divisions of administration and is also a developed country with a high living standard. In Asia, South Korea is the 4th largest economy and is 15th largest in the whole world. The economy wholly depends on export, focusing on productions like automobiles, electronics, ships, robotics, petrochemicals and machinery. South Korea has been one of the leading members of WTO, G-20, United Nations and etc. Culture Taking the culture of South Korea into consideration, it is observed that it is mainly dominated by Buddhism and Christians. Korean Confucianism is strongly influenced on the practices of these faiths. Just 0.2% of South Koreans believe in "Confucianism". At certain times of the year Confucian rituals are practiced. Most important among them is the annual festival at the Shrine of Confucius located in Seoul. Other festivals, like the honor of clan founders, are held at the other shrines located throughout the country.  In tradition of Confucian, father is the head of family and he will be responsible to supply food, shelter and etc, and also have to approve the marriages of the members belonging to the family (Asian Info, n.d.). Education In terms of education, it can be said that the literacy rate South Korean male is that of 99.2% and female is 96.6%, according to the census of 2002. Education is treated as crucial for being successful, and therefore consequently competition is heated and fierceful. In the year 2006, the program for the International Student Assessment by OECD, South Korea ranked first in solving problems, and was ranked third in mathematics and eleventh in science. Education system of South Korea is technically advanced and it is the one of the worlds first country to introduce high speed internet enabled with optical-fibre broadband accessed to all primary and high schools through out the nation. Taking this infrastructural facility, it has develop its first digitally equipped textbooks nation wide, which is going to be distributed free to all primary and also secondary schools world wide by the year of 2013 (CIA, n.d.). South Korea opts for a new program of education to increase foreign students by 2010. Ministry of Education says that the number of scholarships for foreign students will be increasing at rapid pace which will reach approx 1,00,000 by this year (Asian Info, n.d.). Analysis Porter’s Diamond Approach to the Competitiveness of Korea’s Clothing Industry The Korean textiles and clothing industry has a main role in country’s growth. However, this sector’s competitiveness is declining due to labor costs. For country’s economic expansion, spirited factors need to be deliberately developed. The idea of this study is to discover what country’s competitiveness in the worldwide clothing market is after declining its labor competitiveness and country’s efficiency in achieving it. The Table 1 shows the customary spirited benefit factors with the new spirited benefit factors of Korea’s clothing business. Table 1 Porter (1998) determinants Traditional competitive advantage factors New competitive advantage factors Factor conditions Basic factors: such as inexpert labor and raw resources Advanced factors: expert human resources such as creative designers. specific factors such as production and process technologies that are specific to treatment worldwide source and management (e.g. EDI) Demand conditions Demanding functionality and accessibility of clothing items Demanding higher levels of needs such as brand name and service Related and supporting industries Occurrence of globally spirited back-end supplier industries (e.g. raw materials producers) Presence of globally competitive front-end industries that organize global supply chain management with due efficiency (e.g. advertising, buying office, information technology) Firm strategy, structure, and rivalry Association and plan of most clothing firms are suited to industries’ source of competitive advantage: high class design Organization as well as strategy of most of the clothing firms are well-matched with the industrial source of competitive advantage: design, agility plus high quality (Emerald Sight, 2006). In Table 2, shows Porters determinants with the new competitive advantage, following current status and solutions through internationalization. Table 2 Porter’s (1998) determinants New competitive advantage factors Current status Solutions through internationalization Factor conditions Advanced factors: expert human resources such as creative designers. Specialized factors such as production and process technologies that are specific in handling global sourcing and Management (e.g. EDI). Factors creating enthusiasm (e.g. eagerness to learn contributes in creating abundant educated human resources). Fashion designers start to gain international appreciation Factors can be shaped by hiring overseas expert designers and co-development of the designs. While level of general technology infrastructure is the match of most sophisticated countries, specific production and process technology is still a challenge Demand conditions Demanding higher levels of needs such as brand name and service Fashion consumers are extremely demanding and refined. Some Korean brands have a presence in some Asian countries as well as in the US The firm needs to expand its international markets. The firm should make use of inbound and outbound FDI efficiently to create worldwide brands. Understanding demand of worldwide consumers is challenging Related and supporting industries Presence of globally aggressive front-end industries that manage international supply chain management efficiently (e.g. advertising, buying office, information technology) Plentiful experience of triangle built-up in which Korea learns how to organize global production and trade network However, Korea has not own an globally competitive advertising industry and IT industries. These can be achieved using an international workers Firm strategy, structure, and rivalry Organization and plan of most clothing firms are suited to industries’ source of spirited advantage: high quality design plus dexterity Geographic concentration, domestic competition and personal networks make easy nimble reaction to the market For nimbleness to worldwide markets, a firm system is needed better than personal network. However, high class design with nimbleness remains a challenge. (Emerald Sight, 2006) For the establishment of a Porter’s diamond system, internationalization should be introduced. Once an industry enters into global market, the factors of the diamond will be utilized, where the challenges can be solved. For e.g., once the industry enters into a global market , it will look after the needs so as to upgrade its production and process technologies to handle large orders rapidly and competently. Internationalization of the Korean attire industry would make competitive determinant more dynamic and will create a self-reinforcing consistent system. Development of Korea & Comparison with Other Nations Development of Korea Since the last three decades, right from 1962 to 1997, Koreas GNP increased from US $ 2.3 billion to US $ 437.4 billion. The key to success is the development of a strategy into exports which has been the facilitator of the growth factor; this strategy reflects Korea’s insufficiency of natural resources, its limited margin of internal market, and its well abundant and well educated manpower. The manufacturing sectors increase GDP from 14.4% to over 25.9% in the year 1996. The gross saving ratio rises to 34.8 percent from 11.0 percent on the same year. These programmes are successful at raising the crops and in rural incomes and reducing the imbalances in Koreans living standard. The HCI policies produced impressive result. Within 1972 and 1978, the GNP growth scale average to 10.8 % annually, the annually growth rate scaled from 1976 and 1978 reached to 11.2 %. In observing the agreement between Korean government and IMF, the economical reforms programme had been pursuing the focus on macro economic stabilities and overall economic reform of Korean economies. The macro economic policies aimed to achieve the stability of requiring the acquisitions of sufficiency in foreign reserve, reformed the corporate and the financial sectors, and a foundation has been laid for enhancement of the countrys long term basis. The Bank of Korea maintains a tight monetized policy since 1997, reflecting in the market interest rates hike up at one point and reached as low to 20%. In a public sector, a government budgeting is implemented with a growth rate of 3.8%, which is lower than the nominally GDP growth. The organizations and the staff of government based agencies are reorganized and paired down while the localized government budgets are reduced. The corporate sector reform aims to achieve two prime objectives. Firstly, it aims on reducing the shape & size of corporate debts and secondly, it aimed to introduce a new corporate governing structure that will help to induce better rules and will have more transparency in management. Unlike the past, the government is not going to intervene in a direct way in restructuring the corporate world. Instead, the government will be focusing only on improvising the legal and the institutional environment so as to facilitate and monitor the system. The government is going to support the financial sectors to expedite on its restructuring effort by helping funds for recapitalizing and liquidating all NP bonds. Financial restructurising is going to help the corporate sectors reforms by ease liquidation on constraints and enhanced the monitored mechanism. A legally protected right for the minority shareholder has also been strengthened. The representation requiring for the derivative suit against the managerial abuse had been reduced from 1 % to 0.01 %. The revision Security Exchanges Act also have allowed any shareholders with at least of 0.5 % (previously 1 %) ownership of the right to ask those firms to dismiss a director or an auditor and with 1 % ownership (previously 3 %) to review the financial account of the firms. The big industries like Hyundai, Daewoo ,Samsung, LG and etc had agree to align their lines of businesses into seven different areas like semiconductors, automobiles, petrochemicals, rolling-stock, aircraft, electric generating facilities, etc. In improvising efficiency through increasing flexibility, the Korean government addressed the equity and socialized issues. Unemployment rate increased from 2.6 % in November 1997 to 7.6 % in July 1998 and is expected to increase further. These rates are sources of concern for the government to which it aims to reduce unemployment to insure socialized stability (Asian Info, n.d.). The structure of employment, taking into consideration the educational background, shows an increasing trend of workers attained to higher level of education per year. The total number of employed, the percentage of those who are educated through schools or lower level of schools has declined from 58.9% in 1985 to 48.6% in 1990 and 36.8% in 1997. Simultaneously, the percentage of highly educated skilful workers with a college degree or higher has increased, from 10.3% in 1985 to 20.3% in 1997. The non-salaried employees have been decreasing over the years while the percentages of salary based employees have been increasing (Asian Info, n.d.). All the development can be rooted to the massive reforms in the segments of education that the nation undertook once it came out of the rule of Japan. Also, the culture of the country has propagated growth that has transformed the country in to a fast developing nation. Korea’s Comparison with Singapore The above table shows the Porter’s diamond approach of Korea in comparison to Singapore, where, it is seen that in each & every factors of porter’s model, Singapore was ahead of Korea. South Korea’s FDI Status (World Bank, 2007). The graph states that FDI inflows reached at a peak point of US $ 70 Billion in the year 2004 in compared to US $ 30 Billion in 2003. Again it reduced in the year of 2005 and 2006. Labor production growths in the service sector have been low compared to manufacturing sector. This is because of weak competition in service, resulting from strict product market regulations and the low level of import penetration and that of foreign direct investments (FDI) inflow. Increase in the productivity in the service sector, which accounts for about 67% of employment in South Korea, is essential to sustain a high potential growth. This is to strengthen the competition through elimination of internal entry barriers, accelerate the regulatory reforms, upgrade the competitive policies and reduce the barriers to trade and the inflows of FDI. Another challenge is enhancing the performance and accelerating the restructure of the SMEs, which accounts for about 90% of service-sector employment. It is important to boost production in service industry with high growth potentials, like communications and finance sectors (OECD, 2008). Opportunities Koreas economies stand at a significant crossroad and face new challenges. With the future path of the country depends upon the prudence of the political leaders, the government, workers, the business leaders, and the public jointly managed the current economical crisis. Current accounts surplus is maintained, since from November 1997, with the help of increasing exports and decreasing internal demand. Foreign exchange rates have been stabilized at pre crisis levels and the stock price index has been recovering from its low due to the resuming of foreign capital influxes. Subsequently, series of liberalizing measures starting to take effects, especially on the corporate sector. There have been actively mergers and acquisitions between foreign and Korean firms and the foreign firms participating in the Korean market. It is significant to know that these reforms processes did not start with the financial crisis of 1997 but with South Koreas membership in OECD. With well equipped infrastructure for market economies, Korea will definitely become the economical centers of Northeast Asia, with lots of opportunities for investing. Koreas rich human resource, the history of miraculously developing and not committing to liberalized democracy are all attested to its potentials to create a new robust economy of the decade (Asian Info, n.d.). Conclusion Earlier, South Korea had many deficiencies. South Korea was a part of Japan, so only 0.02% of the population believed in Confucianism. Now Korea is divided into two parts namely South & North Korea and is separated from Japan. In South Korea, Confucianism is a national belief in terms of its principles & teachings. South Korea is technologically advanced in education system and strong in its beliefs and faiths and therefore has strengthened its national competency in global market in terms of attracting FDIs & MNCs. References Asian Info, No Date. Overview, Korea’s Economy. [Online] Available at: http://www.asianinfo.org/asianinfo/korea/economy.htm [Accessed May 07, 2010]. Asian Info, No Date. Seoul, General Information. [Online] Available at: http://www.asianinfo.org/asianinfo/seoul/seoul.htm [Accessed May 07, 2010]. Bartle, P., No Date. The Meaning of Culture. Community Empowerment. [Online] Available at: http://www.scn.org/cmp/modules/per-culm.htm [Accessed May 07, 2010]. CIA, No Date. Korea, South. World Fact Book. [Online] Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ks.html [Accessed May 07, 2010]. Emerald Sight, 2006. The diamond approach to the competitiveness of Koreas apparel industry: Michael Porter and beyond. Journal of Fashion Marketing and Management. [Online] Available at: http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=13E571B586C61B8240EB61350ECE97A6?contentType=Article&hdAction=lnkpdf&contentId=1556718 [Accessed May 07, 2010]. OECD, 2008. Economic Survey of Korea 2008. Economics Department. [Online] Available at: http://www.oecd.org/document/24/0,3343,en_2649_33733_41831512_1_1_1_1,00.html [Accessed May 07, 2010]. World Bank, 2007. Comparison of GDP, Merchandise Trade and FDI Inflow. South Korea. [Online] Available at: http://www.fdi.net/country/sub_index.cfm?countrynum=108 [Accessed May 07, 2010]. Bibliography Cho, Dong-Sung. A Dynamic Approach to International Competitiveness: The Case of Korea. Asia Pacific Business Review, 1994. Kim, J. & Rowley, C. Commitment to Company and Labour Union, International Journal of Human Resource Management, 2006. Kim, A. E., & Park, G. S. Nationalism, Confucianism, work ethic and industrialization in South Korea. Journal of Contemporary Asia, 2003. Rohan Cultural Heritage Institute, No Date. Definition of Culture. Home. [Online] Available at: http://www.roshan-institute.org/templates/System/details.asp?id=39783&PID=474552 [Accessed May 07, 2010]. Read More